This auction is nonbinding.I am buying the right to buy $1000 worth of BTC at the optimal price from 1/5/2012 to 2/5/2012 (meaning that I will buy at the lowest price in that time period). This option will mature on 2/5/2012, and is only exercisable on that day.This auction is a reverse auction; there is no starting bid or minimum increment. You can bid whatever you want since it's nonbinding. I'm simply looking for a price estimate, and will consider any good offer.

How will you manage your counter-party risk? It has real potential to blow up in the face of whoever bids on this.

I'll look at WoT ratings and make a decision based on price/rating.Remember, this is NONBINDING so please bid a serious amount

It's hard to know what a serious amount is. The potential risk is high and hard to price or hedge. If the price spikes down to 50 cents for a millisecond and then back to $5, I'd be losing $9000 on the option, so the premium needs to compensate me for the risk.

Why not the lowest daily weighted average for the period? Should be approx the same as the lowest value, after odd spikes are averaged out. And when you say non-binding does that mean either of the parties can just decide to not go through with the deal at maturation?

Why not the lowest daily weighted average for the period? Should be approx the same as the lowest value, after odd spikes are averaged out. And when you say non-binding does that mean either of the parties can just decide to not go through with the deal at maturation?

I think he means your bids here are non-binding, but form the basis for discussions towards reaching a mutually binding agreement, negotiated by PMs. Once the option writer has received the premium, the option would be binding on them. INAUN could decide at maturity whether to exercise the option, although it would only make sense not to exercise the option if the price on the last day was the lowest, or the price looked to be headed lower. Otherwise, such an option would definitely be in the money.

I'll do $1100 for an option exercisable at the lowest weighted average price reported by bitcoincharts.com.

I was looking at Black-Scholes before but did not remember that formula, not that I should have.

I kinda think $1100 is a bit high because you will have the ability to buy bitcoins on the way down lowing your risk. Every time BTC goes down say 33% buy $1000 worth of bitcoins. You can do that 11 times with $11k.